geographic map and show where those parks are in the case of parks, in the case of streets and sidewalks, similarly for them. as we develop our score card, we could ask specific questions about service and reliability and water quality and supply assurance, earthquake preparedness by neighborhood as examples if that would be helpful. >> can i get a copy of that raoerth? >> yes. * report for the viewing public, both the reports for streets and parks are at the controller's website. >> any questions? commissioner moran. >> thank you very much. this is a policy that's been in the works for sometime. i don't know when we first started talking about it, but it was a year ago. >> yes. >> and it comes out of a real concern that our financial plans and projections show a continuation of a very steep

increase in rates over time. and we have in the past had rate backlash that resulted in a rate freeze. i expected at some point we are going to be under a great deal of scrutiny to demonstrate that we have spent the people's money wisely. as we ask for more of it, the threshold question will be, how did you do with the stuff we already gave you? so, the intent of the policy was to provide a set of assurances to rate payers that as we spend your money, we will do it consistent with law and also as wisely as we possibly can. also wanted to make sure this wasn't just a bunch of words. we wanted it to be structured in such a way that somebody could audit it and could go in and take a look at our

performance and say, you set out to be good guys, how have you performed against that? as we stand before our rate payers to be able to say, we have committed to managing your money well, we have been audited by the controller against our objectives, and we have an answer on that. hopefully that answer will be that we have met and exceeded all of those objectives. so, i think it's very important. and i think over the course of the last year, the various drafts of this policy have improved significantly, and i think it's been worth that time. i also wanted to note the comments that we received from cac and -- especially chc had a bunch of recommendationses that deal with rate setting. that is not the particular

purpose of this policy. we do have a rates policy. i think they raise some great questions, and i think it would be well worth our time to take a look at the rate policy that we have, the recommendations that we have from the cac, and see if we should be making changes to the rate policy to deal with some of the issues that they raise. chief among them, frankly, is that the average income in the city may be $73,000 per household, but there's a whole lot of people that don't even make half that. so, what may be reasonable the average san francisco household may be quite a burden for people. and we need to be able to address that in some way. there are some constraints in state law as to what we can do on that, but we need to address that issue if we hope to have the continued support of all of the communities of this city. so, i think those are very important comments.

i don't think they apply really to this policy, but i think that as we go forward, i think taking a look at the rate policy and dealing with though issues i think would be very helpful. the bond oversight committee did have some comments that i think do impact this policy quite directly. specifically, the one -- the incentive i like aside from the fact we are committing to try to do a bunch of stuff, there should be some objective that you actually accomplish it in some way. some outcome-based objective. and they suggested that we maintain operating costs as being flat. what i have worked with staff on is an amendment that i would like to propose to the policy that would accomplish -- i'll

read it, it's very short. it adds a section called operating cost containment. it would read, to the extent that operating costs are determined by puc actions and choices, it is the policy of this commission to limit operating cost increases exclusive of debt service and cash funded capital investment to no more than the cost of inflation. any budget increases above this level will be supported by findings of necessity, adopted by the commission, and detail the specific reasons and needs for increases above the rate of inflation. the intent is to recognize -- first of all, we're not entirely in control of our own costs. rates are set by m-o-us. [speaker not understood] so, we don't have control over everything. for the things that we do control, cost containment is an important objective. i don't think we should tie our hands and say that it will have to be flat.

there may be good and sufficient reasons that we have to go above that. but if we do, we need to explain why. what those requirements were, how it calculates to an impact on the rates, and why that is a necessary thing for us to do. and there was basically nothing else we could do to offset those costs some other way, that we owe it to ourselves, we owe it to our rate payers that we make that kind of a finding. so, i think that's a very valuable addition. i'm sorry? >> where would you place the language? >> i think inserting that after the sustainability paragraph right before the report card might be addition emphasis as we're doing that report card. it can go many places. * additional >> it's meant to conform with the general structure and

exactly where it goes -- >> we'll figure it out. >> yeah, i would leave staff to figure it out. >> mr. president, can i ask a question? >> yes. >> so, when you said personnel costs, how does that reflect in this statement? what part of operating costs? >> it's a cost of inflation, but you don't control a decision on that. >> what i would expect is if labor rates are driving operating costs above the rate of inflation, number one, we would try to figure outweighs to compensate for that mistake with an adjusted flat budget. if we were unable to do that, the statement of necessity would be, but labor rates have exceeded the rate of inflation for this year. we are obligated to meet them. that we have looked at compensating steps and have not been able to recover that cost increase and it's necessary to

pay our employees fairly and to make it a work force to do the job. that is an explanation. if it goes above the rate of inflation, we have to explain that to people. and if it's stuff that we can't control, we can explain. anyway. that would be my intent on that. >> on that item, i think we would also want to be mindful -- i know the labor unions have been very helpful to san francisco in taking pay cuts and tree duckses in some years as well. so, payments have gone down in additional contributions. i know a lot of what you do with policy deliberations is multi-year ten-year cap plans, multi-year sewer system rebuild plans. so, we'd be mindful of that multi-year rate planning as well. clearly those years where salary costs go down because of labor concessions and helpfulness in a bad economy. >> i think within the typesful things that rates pay for, the

easiest to explain are bond issues. especially if it's a bond issue like the bond that were approved by the voters, you asked us to do it, you gave them monies, we promised to repay the loans that we have taken out. that's why your rate went up by this amount. that's very ease toy explain. it buys you seismic safety and reliability. that is an easy explanation to give. the hardest one to give is within operating. operating funds, so many things, some big, some small, that is just hard to explain it. now, if we start from a position that we want to keep things as loud as we can and provide explanations as to the forces, if any, that drive you above that, then i think that goes a long wail to completing an understandable story as to why rates have to be what they have to be. >> what form do you want this to take? >> i will move this as an

amendment to the policy that is in front of you. >> i was just going to ask you to read it again just to be -- because we don't have handouts for any members of the audience. i just wanted to make sure it's clear on the record what you're moving. >> okay. so, add a section to the policy that's in front of the commission. the placement of that addition to be left to staff. and the addition to be titled operating cost containment and to read as follows. to the extent that operating costs are determined by the puc, actions and choices, it is the policy of the commission to limit operating cost increases exclusive of debt service and cash funded capital investment to no more than the cost of inflation. any budget increases above this level will be supported by findings of necessity, adopt

{speaker not understood] >> we would want to hear a good valid argument. >> yes. >> and the criteria by which to make a decision. what if there is some kind of immediate need or disaster, an emergency where it's all hands on deck and there is an operational impact? >> well, first of all, any emergency -- these are objectives, as a policy, it is an objective. it is not a limitation on expenditure. any legal expenditure could be made by staff to deal with any necessities they would have. there is nothing in here that would change that. it sets an objective. and then the second sentence deals with budgets. *

okay, not with expenditures during the year to respond with emergencies, but the budget. so, we're planning how we're going to spend money. in that case if we're planning to spend at a rate that is higher than inflation, we owe an explanation to ourselves and to everybody who pays rates. >> [speaker not understood]. >> yes. >> commissioner vietor has articulater. all right, any other comments or public comments? i know [speaker not understood] had a comment here. so, let's make sure we have a motion in front of us first. >> i moved it. >> moved and seconded? >> second. >> second. the motion is before us. >> david filcoff. thank you for the discussion. i'm excited about this policy. i get very excited about commission policy. i may be the only one, but hey. so, i was -- >> careful with the podium. yes, sorry. i'm sorry i was actually not at the cac meeting last month because it was just before a jewish holiday. but i had some quick comments

on this. i'm very supportive of the proposal, but just had some minor tweaks. on page 1 of the policy itself under personnel management, it says personal costs, i believe that should probably read "personnel costs." with regard to commissioner moran's amendment, if just want to be careful that we're not requiring some particular set of findings in the budget adoption resolution for each increase and each enterprise or any particular line item that exceeds the cost of inflation if that -- if the intent -- and i understand it, with the intent that there be some general statement in an adopted budget that makes those kinds of findings. broadly that's fine, but not as to each particular line item that may exceed the rate of inflation for whatever reason.

>> i absolutely agree with that. i think an explanation has to cite some specific reasons. right. >> but if you have offsetting increases and decreases, there's no sense of explaining every increase. that's certainly the intent. agreed. >> do you want to be more specific or just leave it at that? i think it probably works as is. i don't know. >> i guess it's looking at whether or not the operating costs or it's just the budget in general, the overall sfpuc budget. >> you have to ask the maker of the motion. >> yeah, i'm just looking. >> if we amend it to say any budget that increases budgeted expenditures above this level, basically it's referring to a budget as a whole, not a line

item in the budget. that might clarify. >> is there a time issue here that we have to pass this today, or should we take a little more time to refine the language? i just want to make sure the intent is not lost because we didn't think of everything. >> liedic to to support the proposal. >> there's no time issue. we can perfect it with each iteration. * i'd like >> [speaker not understood]. >> we can further amend it. >> any other comments, david? >> there is perhaps -- well, why don't we let mr. filkoff conclude. as to the proposed correspondent card, i like this a lot. i think this is good in terms of a qualitative assessment. i think it should be accompanied by some sort of quantitative measures, which i'm sure todd will develop and i'm happy to consult with.

i'm not sure i would use the word "he can logical" there. i would use environmental. it seems like a better read. * ecological i would make this a report to the advisory committees as was suggested published in the website. i assume this policy and the referenced policies are or will be on the website. i would think that the report card could include the bureaus and not just the three enterprises. and where it refers to water resource adequacy, there could probably be some language that is more appropriate to wastewater and power because it must come from one of those places. there should be a date on the bottom of the policies because the policy may get amended in the future. and then, so, the reference to the attached policy should probably say rate assurance policy of today's date or whenever the commission adopts

it. i'm happy to talk further to todd, but again really good work and i'm very supportive. thank you. >> if i might amend my amendment with the consent of the second. consistent with the comments of mr. fill cough made, the sentence would read any budget that increaseses the operating budget above this level we'll be supporting. >> i find that acceptable. * >> any other comments? >> i just had one final on the report card as well. i had sort of a similar question around just whether there could be some quantitative -- i mean, i don't really have a solution, but something that kind of says this is an area that [speaker not understood] at a glance. i'm not sure the parks score card is quite right, but i think it's moving in that direction where it says [speaker not understood] has moved from whatever percentage it was down to 14 parks that still need attention. so, some way to be able to at a

glance look at this and say, well, community sustainability piece needs a little bit of work or something that is more -- >> i think the policy is what you're actually adopting today. the score card is something we will use in the budget process as a tool and we'll refine that over time based on your comments. we'll be coming back to you. that's not what you're adopting, just a policy [speaker not understood]. >> why don't we deal with the motion. i do have a comment about the score card. we can get past the resolution. >> all right. so, your motion as amended. >> yes. >> second. >> second. that was his second. >> sorry. [laughter] >> all right. all those in favor signify by saying aye. >> aye. >> all those opposed? all right, thank you, motion carries as amended. >> do we then have to fill in the main motion? >> right. >> [speaker not understood]. >> you mean the main motion? >> the main motion. >> second. >> all right.

mr. courtney gives you the second. any public comment on the main motion? any other comment by any commissioner? seeing none, all those in favor signify by saying aye. >> aye. >> opposed, abstentions, being none, the motion is carries. >> if i might just make a comment about the report card. >> yes. >> i have one thing that is important is that the report card has very hard links to the specific policies that we have. and it might even make sense to break the report card down to -- we have a rates policy, how are we doing against that. we have a rate payer assurance policy. how are we doing against that? we have a community benefits policy. how are we doing against that? so, the report card reflects the policy structure that the commission has adopted and that the findings are related to the specific elements of the policy and that way i think we can -- i love the idea frankly of

using the report card as an opportunity to cut the story out to people so that they know, number one, that we care how we're spending their money and that they can have some assurance and comfort to the fact we're doing it properly. so, thank you. >> thank you very much. >> thank you. >> our next item, ms. hale, number 14. >> item 14, discussion of procurement plan to meet the requirements of the california renewable energy resources act. >> thank you. barbara hill, assistant general manager for power. i am here today to discuss with you the way we are proposing to comply with the california renewable energy resources act. it's more commonly referred to as the rpf legislation. the act requires the puc to meet 100% of our retail sales with hetch hetchy and rps [speaker not understood] generation. what we're proposing to do is

rely on our existing processes where possible and appropriate to incorporate compliance into our budgeting and financial planning process. in most years, in 83% of all years, business as usual, no extra action is necessary on the city's part to comply with this legislation. we would need to buy any additional rps supplies, 83% of the time. what i'm here today for is to get input and direction from you on our proposal to give our general manager the authority to procure rps supplies to meet any unexpected requirements when they do occur, typically in dry years or in the event of an unexpected generator outage. and to set a cost limitation for compliance, which is allowed under the act. the commission does not need to take action today.

it needs to adopt a procurement plan, however, pursuant to the legislation and the enabling regulation by january 1st, 2013. so, i think we've given you plenty of time to take in the information and digest it before asking for action. you can give us direction. by way of background, i put a slide up if sfgtv folks could go to the overhead for me. it shows, it shows our hetch hetchy annual generation. and, you know, we have 90 years worth of data that we're relying on to project forward. this slide shows you both the actual hetchy generation in the blue bars. the wet year projection, what we refer to as a wet year, what we refer to as normal year here in the green dash line.

and then dry year. we use those same scenarios for our budget planning and financial planning. we set the budget every -- on our budget cycle every two years, assuming a normal generation year, a normal water year. of course, there are exceptions to that which this slide shows. so, the act requires that we -- that we start in calendar year 2011 meet 100% of our retail energy needs from hetch hetchy and rps eligible resources on a calendar year basis. it does have some limited exceptions and i'll describe those to you. what that means to us, sort of the simple math which i show here on the slide is we take our demand, our puc retail sales.

we subtract out our supply, which is made up of hetchy generation and resources. and if that equation results in a positive, that indicates that we need to procure rps eligible resources. as i said, most years it's going to be a negative number. we're going to have more supply than we do retail demand. the act does not apply to our wholesale sales. so, we do not need to meet any rps requirements for sales we make to the districts or into the western systems power pool. and the act has requirements for community aggregation plans like our clean power sf program. but those requirements are set by the cpuc, not by you as a governing body. so, as i mentioned in most years, there's no need to

procure additional supply. the small volumes of additional rps resources would be needed only during dry years. our forecasted need is small, unpredictable, short-term, and nonrecurring. as the slide shows here -- let me move it so you can see -- are actual or actual generation is shown here. the normal year forecast is the green line. we have a forecasted wet year. the forecasted dry year. and then this orange line is our retail sales. so, you can see the demand and the supply. the difference between the green and the orange retail is -- retail sales is our wholesale sales out into the market. so, in almost all years our

generation is sufficient to meet 100% of our retail needs. and it's typically of a quality that meets our rps obligation. so, turning, then, to our proposed procurement plan guidelines and authority, the plan for normal year, we are proposing that we plan to meet normal hydro year conditions just like we do in the budget. we are planning to update our forecast as needed to ensure that we comply with the act. that's also consistent with how we report on a quarterly basis for budget variances. and as i mentioned, we're seeking authorization to have the general manager procure the rps resources as needed within these boundaries, up to 5% of retail sales over the two-year budget cycle. that's about 50,000 megawatt hours. or $500,000, whichever is

greater. his discretion would be capped at that amount. and to meet that requirement at the lowest cost. we would bring to the commission any procurement necessary to comply with the law beyond those levels for further action. so, we're asking -- >> for november 13th? >> beg your pardon? >> you plan to present that november 13? >> no, r i'm planning to present the actual plan and a resolution november 13th. this is -- this give you the information behind it. >> ahead of time? >> yes. >> okay. so, the commission will adopt the procurement plan november 13th? >> if you're comfortable with it, yes. >> but i'm not clear on this. what would the commission workshop november 23rd? >> that's today, that's what we're doing right now. >> oh, this is the workshop? >> this is the workshop. >> i didn't realize that. >> this is the discussion. >> welcome to the commission workshop. >> yes, it's your workshop. [laughter] >> we have this year -- excuse

me, in 2011, just to take that policy proposal that i just put before you and describe what it means to us. in 2011 it was a wet year. there would have been no additional rps purchases needed to comply with the law. the calendar year we're in right now, 2012 is more of a dry year. and we have some plant outages. we project that we will need to procure rps resources to meet the acts requirements. they will be small so they're going to be under the 5% of retail sales limit. we're forecasting each month to monitor and evaluate the need. we expect we will need to procure renewable energy credits equivalent to 50,000 megawatt hours before january 1st, 2013. -- to comply with this law * . we expect that will cost us about $50,000. the act also allows for cost

limitations, as i mentioned, if exceptions. the exceptions briefly are that our obligation is capped at the same level as other publicly owned utilities. so, for example, the requirement for publicly owned utilities is 20% of your retail sales need to be met by rps compliant resources. in 2012 that rises to 33% by 2020. we may delay compliance due to circumstances beyond our control, and we may adopt a cost limitation. so, putting the cap and the delay ability together, for example, if we had an unexpected outage that was significant, but made it so our hetchy generation was less than 67% of our retail sales, that would mean that we would